The Dow Jones Industrial Average dropped 89.84 points, to close at 16,040.56 after rallying nearly 100 points earlier in the day. JPMorgan and Boeing led the laggards. The blue-chip index swung in a wide 194-point range.

The S&P 500 fell 12.01 points, to finish at 1,828.75. And the Nasdaq declined 34.83 points, to end at 4,237.95, snapping an eight-day win streak.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped above 15.

Several participants say the taper should continue unless the economic outlook changes, reports CNBC's Steve Liesman providing analysis on FOMC's minutes from its January policy meeting.

Federal Reserve officials weighed whether it might be time to drop the notion that a 6.5 percent unemployment rate would be enough to consider raising rates, according to the latest meeting minutes.

The Fed Open Market Committee voted at the January meeting to reduce the pace of its monthly bond-buying program by another $10 billion to $65 billion a month.

"The FOMC is likely to stay on its course of measured reduction of its long-term asset purchase program provided incoming information suggest that the economy continues to grow at a moderate pace and financial conditions do not deteriorate," said Tanweer Akram, senior economist at ING Investment Management. "Most participants were determined to stay on course with the current pace tapering."

On the economic front, the Commerce Department said housing starts sank 16 percent to a seasonally adjusted annual rate of 880,000 units. The rate was the lowest since September. It was also the largest percentage drop in three years. The news came a day after home builder sentiment dropped 10 points, according to the National Association of Home Builders' monthly sentiment index, logging its biggest drop in the history of the survey, which started in 1985.

Separately, U.S. producer prices rose for a second straight month in January, pushed up by an increase in the cost of goods, but there was little sign of a broad pick-up in inflation pressures at the factory gate.

Meanwhile, natural gas futures rose to $6 per million British thermal units, hitting its highest level since December 2008, amid forecasts for continued cold weather across the U.S. that will further drive heating demand and deplete natural gas supplies.

The European Union called an extraordinary meeting of its foreign ministers on Thursday as the violence in Ukraine escalates, with the bloc expected to impose sanctions on those responsible for the bloodshed in Kiev. President Barack Obama condemned the violence, warning the government that "there will be consequences" if people step over the line.